15 June 2010
If an assessee being an individual, sells two house properties and invests the proceeds into two different House Properties, to claim exemption from LTCG, what should be the treatment ? What if only one house is sold and the proceeds are invested in two houses to avail exemption u/s 54 ? A case law brings in the interpretation of the General Clauses Act allowing "plural" to be used for "singular" however further clarification is needed since the amount is huge.
54. 61[(1)] 62[ 63[Subject to the provisions of sub-section (2), where, in the case of an assessee 64 being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 65[***], being buildings or 66lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head “Income from house property” (hereafter in this section referred to as the original asset), and the assessee has within a period of 67[one year before or two years after the date on which the transfer took place purchased 68], or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
The words "a residential house" has to be read carefully. When two houses are sold and two houses are purchased no problem and each house can be appropriated to each house sold for calculating the capital gains. When one house is sold and two houses purchased only one could be considered otherwise when the two houses - say two flats one by the side of the other, are one above the other - inter connected and could be construed as one house.
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